Ladies and gentlemen, good day and welcome to the Q4 and FY 2025 conference call of Sanathan Textiles Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference call is being recorded. I now hand the conference over to Mr. Jude D'Souza from Sanathan Textiles. Thank you, and over to you.
Good evening, ladies and gentlemen. It is my privilege to welcome you to this earnings call of Sanathan Textiles Limited for the fourth quarter and full year ended March 2025. I am Jude D'Souza, the Company Secretary and Compliance Officer interested in overseeing investor relations. Before we proceed, I would like to bring to your attention that certain statements made during this discussion may constitute forward-looking statements. These statements are based on our current expectations, assumptions, and beliefs regarding future developments and are inherently subject to various risks, uncertainties, and factors beyond our control. Such forward-looking statements involve both known and unknown risks, and we advise you to interpret them with caution.
Now, it is my honor to introduce the esteemed members of our management team who are present with us today: Mr. Paresh Dattani, the Chairman and Managing Director; Mr. Sammir Dattani, the Executive Director; and Mr. Sanjay Shah, the Chief Financial Officer.
Kindly note that this conference is being recorded, and the recording will be made available on our website accompanied by a full transcript for future reference. Without further ado, I now invite Mr. Paresh Dattani, our Chairman and Managing Director, to share his insights and address the esteemed participants. Thank you.
Good evening, everybody, and thank you for joining us on our Q4 FY 2025 earnings call. It's a pleasure to share with you the journey of Sanathan Textiles Limited and our vision for the future. The year gone by has been transformative for us. We successfully capitalized on the growing demand to strengthen customer relationships for yarns, which is the starting point of the textile value chain. Our strategic focus on innovation, customer centricity, and operational efficiency has yielded strong results across key performance metrics, positioning us well for the future growth. A major highlight of FY 2025 was the successful completion of our IPO, a milestone in the journey of the company. Coming to the industry development, India's textile industry is one of the largest in the world. It contributes about 2.3% to the country's GDP, 13% to the industrial production, and 12% to the exports of the country.
India is the second-largest producer of textiles and garments globally and ranks third in exports. The sector is projected to grow at a 10% CAGR, reaching $350 billion by 2030. Demand conditions in India remain robust, with a strong revival in the textile consumption and continued government push for Make in India. We are also seeing a shift from conventional cotton to value-added man-made fibers, a transition that aligns with our strength in the polyester filament industry. Furthermore, global supply chain realignments, particularly the China Plus One strategy, are creating new opportunities for India. Many international apparel brands are diversifying their sourcing, and India is emerging as a key beneficiary of this shift. On the policy front, the government's initiatives such as the PLI scheme for man-made and technical textiles and the national mission to boost cotton productivity continue to fuel growth for our sector.
These broader industry trends create a highly favorable environment for companies like Sanathan Textiles, where we see strong demand for high-quality yarns across apparel, home textiles, and technical applications. Another significant development on the international trade front is the U.K.-India Free Trade Agreement. As many of you are aware, India and the U.K. have agreed in principle to a historic FTA that is expected to come into force soon. This agreement is expected to reduce tariffs on yarns, textiles, and apparels from India to the U.K. At Sanathan, I'm happy to share that we have made significant progress on our new greenfield facility in Punjab. This state-of-the-art facility is scheduled to be operational by the first quarter of FY 2026 and will effectively double our production capacity of polyester filament yarns when fully operational.
Our expansion in Punjab is a strategic move to bridge the supply gap in North India, ensuring faster deliveries and cost efficiencies for our customers. This marks a significant step towards strengthening India's domestic textile ecosystem. With our greenfield project in Punjab, we are not only scaling up capacity but also integrating sustainable manufacturing practices to minimize environmental impact while maximizing efficiency. This year, Sanathan Textiles promises to ensure that we remain committed to increase capacity, capture new opportunities, build deeper relationships with our stakeholders, and I'm confident that our company is well prepared to scale new heights and deliver transformative growth. Now, I will hand it over to Sammir for the operational highlights. Thank you.
Thank you, Paresh . Good afternoon, everyone. FY 2025 was a good stabilizing year for the company. On the operational front, we optimized production at our Silvassa facility and continued to run at high capacity utilization to meet the growing demand. We operate in three yarn verticals at the facility in Silvassa, having a total production capacity of 223,000 tons per annum across polyester filament yarn division, cotton yarn division, and yarn for technical textiles. In Q4 FY 2025, our total sales volume for the quarter reached 59,850 metric tons approximately, and we saw an increase in EBITDA margins because of strong demand. To meet this rising demand, we are expanding across our yarn business verticals. With the Punjab facility at its final commissioning stage, phase I is on track and set to start by the end of this quarter.
By leveraging our scale, extensive distribution network, and strong customer base, we aim to cater to a broader customer base and optimize costs, thus enhance profitability for us and our customers through an integrated value chain. On our product front, we had an exciting value addition initiative this year with the launch of a new product called S-Flex. S-Flex is a groundbreaking self-stretch polyester filament yarn. This yarn offers a four-way stretch capability without any need for spandex blending, making S-Flex a cost-effective solution, a sustainable alternative to traditional stretch yarns, and also improving recyclability of the fabrics made from S-Flex yarns. We are clearly seeing that the market today is gravitating towards functional, sustainable, and smart textiles, and at Sanathan, we are constantly aligned to these demand trends. Another such example is our moisture management yarn series called Sanathan Dryc ool.
This specialized polyester yarn is engineered to wick moisture and dry quickly, making it a perfect solution for active wear and sportswear and apparels. We are also seeing a growth in our technical textile yarn demand, particularly in the area of coated fabrics and industrial application. While this segment is still relatively small of our overall sales, it represents one of the fastest-growing areas for us. We also cater to the geotextile sector and supply yarns for geofabrics used in infrastructure projects. The company's technical textile yarn division is utilized in related industrial products such as conveyor belts, safety slings, deep-sea fishing nets, marine ropes, and also automobile fabrics. The trend is clear: domestic customer base in technical textile is growing rapidly, and they are looking for domestic suppliers who can deliver consistent quality and high-performance yarns.
Keeping in sync with this growing demand, we are looking at doubling our capacity for yarns for technical textiles from the current 9,000 tons per annum - 18,000 tons per annum in the near future. Another area of high growth is affordable fast fashion. There is a pronounced shift in the market towards affordable fashion, essentially value-for-money apparels that are trendy yet budget-friendly. This is true in India with the growth of organized value retail chains that are multiplying in the country. Affordable fashion requires materials that are cost-effective. They also need differentiation and quality to satisfy the customer demand. This is where our innovative yarn offering gives us an edge by providing yarns that are built with functionality and with cost advantages.
We work with our downstream partners and try and reduce production costs and create better products for the end consumer. I will now hand over to Mr. Sanjay Shah, our CFO, who will provide detailed financial overview. Thank you.
Thank you, Sammir. For the quarter ended March 31st, 2025, revenue from operations stood at INR 732.18 crore. EBITDA for the quarter is INR 67.61 crore, with margins at 9.23%. PAT stood at INR 43.65 crore, with margins at 5.96%. For the full year ended March 31st, 2025, revenue from operations stood at INR 2,998.61 crore, as against INR 2,957.50 crore in FY 2024, an increase of 1.39%. EBITDA for FY 2025 stood at INR 262.78 crore, as against INR 226.58 crore in FY 2024, an increase of 15.98% year-on-year. On account of gross margins, this has led to improvement in EBITDA margins by 110 basis points. FY 2025 PAT stood at INR 160.45 crore, against PAT of INR 133.85 crore in FY 2024, an increase of 19.87% year-on-year, and improvement of PAT margin by 82 basis points. Thank you, everyone.
Should we begin with the question- and- answer session?
Yes.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. We will wait for a moment while the question queue assembles. We'll take a first question from the line of Rushil Selarka from PINC Wealth. Please go ahead.
Please go ahead, Rushil.
Hello?
Yes, please go ahead with your question.
Yeah. Yes, sir. My question is that in the export market, are we uncompetitive? The Indian textile industry is uncompetitive because China has a raw material advantage, and because of that, we are not being able to get a higher lead margin compared to the Chinese player.
You are right to a certain extent. Yes, our raw materials are a little more expensive than the Chinese ones. But having said that, for re-export, we can always import non-BIS cargo from China also. Then the only differential is the freight component, which is not very high. And this too, going forward with the new commissioning of the two new plants in the next quarter in the country, I think we should be even in a more competitive position.
So this IOCL and GAIL are expanding their PTA plant, right?
PTA plant.
Yeah. So that will give us an advantage, sir, in terms of procurement of raw material?
Yes. Yes. Because as a country, we today import about almost 1.8-2 million tons of PTA per year, and with these two plants, there will be a capacity addition of almost 2.4-2.5 million tons per annum, so we will be, as a country, excess in PTA, and that will give us the edge that you are talking about.
So, sir, will there be any cost savings from the next year itself? How much we import PTA and how much we procure domestically? So there will be any mix where we'll be procuring more on domestic side and less on import side?
Yes. At Sanathan today, as we stand today for the Silvassa plant, we import about 50% of our raw material. Going forward, yes, once these plants start, the imports will definitely come down to a minimal level. At the Punjab facility, of course, we have a tie-up, and we intend to buy most of our raw material coming from the Panipat refinery of Indian Oil.
Okay. And sir, how does crude oil affect our realization? And do we do any contract to mitigate this risk, or is there short-term contracts and these crude oil prices do affect us in terms of realization?
No, crude oil prices do not directly impact us in any way. But having said that, yes, when the crude oil fluctuates a lot, it does have an impact on the PTA and the paraxylene prices. So somewhere down the line, it affects us. But having said that, because of our pricing, as I've always said, locally, we do a weekly pricing, the PTA suppliers, and internationally, once a month, on average 15 days. So we are not carrying that much of risk of raw material volatility at all.
Sir, when we sell to clients, so that time also we do a contract, or we sell it on day-to-day price basis?
No. As I said, because our local PTA raw material contracts are changing every week, which gives us a seven-day volatility, internationally about a month, so averagely 15 days. So when we sell material, yes, we fix the pricing for those to about 15 days only.
Okay. Got it, sir. And sir, what will be the new power cost in terms of unit in Punjab plant?
Punjab plant, we have an agreement with the government where they give us power at INR 5 a unit for the next four years, for the first four years.
Okay. And sir, is there going forward, is there any requirement for us to invest in renewable so that our power cost per unit comes down over the time, which will give us more in terms of efficiency and in terms of margin?
There is no compulsion from the government side to set up any power establishment. But at INR 5 a unit, we still have to work out, and we are working on that. Going forward, once we get over the four years, how do we tackle this issue and where we are prepared with a lower or even an equal or lower cost of power going forward?
Sir, the Silvassa, what will be your power cost?
Silvassa, averagely the power cost is close to INR 6.
6 per unit.
Yeah, so Silvassa is about INR 6 per unit, and Gujarat is about close to INR 8 a unit.
Okay, and sir, let's say—
In Punjab, we are at about—
Okay. Hello?
Yeah.
Yeah. So my question is that—
Yeah. We can hear you.
Yeah. So will there be any indirect impact? Let's say hypothetically, if tomorrow, let's say the U.S. puts a tariff on India, so will there be an indirect impact to us? Though we are upstream players, but our downstream players might face the demand impact so that in a way, we will also get impacted.
See, directly, there won't be much of an impact to us. Yes, we do export to the United States even today and we are competitive enough in both the yarn for technical textiles as well as DTY to export a small quantity every month, but on the tariff front, yes, as it stands today, we are better off than China, and we expect that differential to remain. See, tariffs by number will not impact. It's only a differential tariff that is going to decide the way it moves forward and there, I think, even for us as well as for our downstream, that is what we call indirect export, is also going to be advantageous.
But sir, don't you think that there will be a demand impact because of the high inflation, and there will be demand slowdown because of that? Though we will have an advantage compared to the other countries, but in terms of demand, can it impact us?
Yeah. I mean, when we are at an advantage, even if there is a demand issue there because of the higher inflation, well, it's going to affect us less than anybody else. As a country, we are still going to be better off than anybody else there.
Sir, can you elaborate how big advantage for us will be with the U.K. FTA agreement? How it will be big for a player like us?
FTA will be a big advantage. It will be a big advantage because averagely the duty that they are charging today is between 9% - 12.5% depending on product to product. Now that 12%, averagely 11%-12% duty going away is going to be a big advantage.
And sir, how is the demand going forward? If you can just give us some color. Since our Punjab plant is also coming into operation from Q1 FY 2026.
Yes. The color I would give you that way is that today, as we stand today, as an industry, we are operating almost at about 83-85% efficiency, which realistically is close to 90-odd% because the listed capacity, some of them are not in a position to commission. So I mean, we are almost as an industry running and, well, it's all placed and everybody is moving well. So I don't see any impact of demand coming in from there.
Okay, sir. Thank you, sir.
Thank you. We'll take a next question from the line of Sunil Jain from Nirmal Bang Securities. Please go ahead.
Yeah. Thanks for taking my question. This is more related to your expansion. So this expansion, you said that will be in phases. So can you describe what will be the phase I and then phase II?
Yeah. See, we have set up a capacity there which can, at peak levels, go up to about 950 tons a day of production of polyester filament yarns. As we stand, we have divided this into two phases. In the first phase, we will be at between 680 - 700 tons per day. And then in the second phase, we will be going up to 940 tons a day. That's how we have divided this phase.
Second phase, when it will be starting?
FY 2028, we'll have the impact of revenue and earnings on the second phase also.
Got it. Okay. So right now, we are working on this 680, and we had invested money for 680.
680-700 tons per day. Yes. So effectively, just to give you a gist, we are today at 200,000 tons of polyester filament yarns. The first phase will give us an additional 250,000 tons. And when we complete the second phase, we'll be adding another 100,000 tons to that.
Okay. And about the subsidy available in this plant, can you give an idea how much subsidy will be having and how much it can have a benefit on EBITDA per kg of yarn? Right now, you are making around INR 11. So how better you can do in that?
No. As far as the subsidies are concerned, two parts I will break this question into. One, our philosophy is that never to plan any project based on government subsidies. Whatever comes is a cherry on the cake. The plant must pay for itself and earn for itself. Having said that, in Punjab, what the government has given us as per our agreement is, besides power at INR 5 a unit on a discounted tariff, they give us net state GST refund, which is applicable up to two times the FCI up to a period of 17 years, and there is a small subsidy based on the number of employees you do per person, INR 50,000 per person for a period of seven years.
Yeah. That is okay. But how it will get translated into your profitability?
No. We are not looking at whatever numbers we are working on today, and what we are giving out is got no element of government subsidies in it. Whatever comes out will come out to be an additional benefit on the numbers that we put out.
Yeah. That's only I was looking at it means INR 11, INR 12 anyhow you do. And because of nearing to the customer, you may do some benefit. You may get some benefit on that account of transportation. But apart from that, the additional will be there from the subsidy, which you may be accounting for.
There is nothing on that subsidy there. What advantage we have there, I'll just put it out again. We have two basic advantages there. One is on the operational side where we are cheaper. When we compare operational, we compare it to our existing plant in Silvassa where we are at INR 6 a unit of power. Here, we are at INR 5 a unit. So that's going to be an advantage. The other one is that on the heating front for our boilers, we use gas here. There being an agriculture belt, we are having the world's best solid-state heaters from Belgium, for Vyncke, which is going to result in a saving of 50% on the heating cost.
Over and above that, because of the sheer economy of scale and better full automation over there, we are going to be lower on manpower salary and power cost. That's on the OpEx side. The other point that you put forward regarding on the freight component, yes, as we stand today, out of the 4.4 million tons that we produce as a country, which is all produced on the western side of the country, about a million tons is consumed annually at these five principal markets in the north. We are going to be the first suppliers there. There's no other supplier at this point in time there. Effectively, every customer there pays about INR 4,500-INR 5,000 a ton as freight for getting the material from here.
The cost for us to supply to any of these markets is going to be close to about INR 800-INR 1,000 a ton. So there's going to be an advantage of freight differential, and there's going to be an advantage of the OpEx cost.
Sorry to harp on. Yeah, y eah. It's clear. Just one small thing I'm not able to get it clear. So GST benefit you will be getting. So that will not mean that will be passed on to the customer or whatever the capital, or—
No. That will not be passed on to the customer.
Or it will be accounted in capital subsidies?
When we get the GST refund, it's a net GST payable refund. When we get that refund, it's going to be an extra add to our profitability, not passed to the customer.
Okay. So that will be an additional, I think, ongoing.
That will be an additional.
Yes. Okay. Fine, sir. Okay. Thank you very much. That was my question.
Thank you. We'll take our next question from the line of Aashish Upganlawar from InvesQ PMS. Please go ahead.
Yeah. Sir, I think someone touched upon this point earlier also, but just wanted to understand. I could see in your presentation the customer list that you've shown. But I mean, indirectly, how much of your sales would be kind of related to someone exporting to the U.S. that way? Because indirectly, there could be an impact. So is there a percentage that you could give us that this is the percentage of our sales, which is further processed and goes to U.S. markets? Some sort of number would help you.
I can give you a number. In totality, we have a direct export. If you see over years, moving between 5% and 16%, depending on year to year, depending on our better net backs, that's the direct. On the indirect export is what you are referring to. Effectively, our calculation tells us that in general, we do about 30% of indirect exports, and a portion of that could be to the U.S., but I see that going up only. I don't see that coming down.
Okay. So what we are hearing, I mean, from most of the companies involved in, I mean, heavily dependent on the U.S., whether those are textile companies or maybe in other segments, that the buyers are kind of bearing only a part of the increase in tariff, which is 10% per day. So most of the companies are guiding for a margin squeeze. So indirectly, I mean, that pressure can come to us also. If our buyers are facing the same thing. So how should one rate the situation from Sanathan's perspective? How things would go from here?
No. I would just clarify this in a different way. If you are trying to say that the customers are bearing a part of the duty cost import and the balance they are putting on the seller here, at the end of it, even if they get half of that, the net pricing from the seller will go up. So definitely, the fabric and the apparel guys will be at an advantage. As far as Sanathan is concerned, we don't see that happening, and we have not received anything from any of our customers today regarding this.
Okay. And secondly, sir, I wanted to understand on our raw material procurement. You said, I think, reasonable would be imported and other would be domestic. So a bifurcation on this would help. And who would be our key suppliers? Would it be maybe Reliance or other players in the petrochemical industry here?
At the moment, as I mentioned earlier, that we are importing about 50%-55% of our raw materials from abroad, and the balance is locally, which we source from Indian Oil as well as Reliance. Going forward with the new plants starting in the coming year, this 50% of imported is definitely going to come down by a substantial number. As far as our Punjab facility is concerned, most of our PTA and MEG will be coming from the Indian Oil Refinery at Panipat.
Okay. Okay. Lastly, sir, I wanted to understand historically, whatever financials have been available to us, we had peak EBITDA of, I think, 15%-17%, and today we are at, say, it used to be at, say, 7%-8% touched, and now we are at about close to 10%. So how one should, I mean, track the data which affects your margins either on the positive side or the negative side?
You are right. We had done an EBITDA as much as 18% also, and this was the post-COVID years. Following that, when the war started, it dropped down to as low as 7.9% also. But both these were, I would call them, non-normal years. They are more freak years. So leave them aside. Yes, as we said, this year, we have done close to 9% EBITDA, which we had predicted that we would do close to 9%. Once we commissioned Punjab at the end of the first quarter, we expect to do a revenue. We are not going to get the full revenue out of that plant in the FY 2026. So we consolidated as a company level, we aim to do an EBITDA of about 10%-11%.
Going forward, when the full plant starts and the second phase gets completed, we aim to do an EBITDA close to 12% on that.
A normalized EBITDA margin would be around 12% for the company, typically.
That's right.
Okay. Okay.
It's an average EBITDA. So we have years which go up and down, but yes, at an average level, over a three, five-year, seven-year phase, yes, this is what it will be.
Okay. Sure. Thank you so much, sir.
Thank you. Before we take the next question, we'd like to remind participants to press star and one to ask a question. We'll take our next question from the line of Dhawal Doshi from Dymon Asia Capital. Please go ahead.
Hello, Paresh. Hello. Hi, Sammir. Hello.
Hi, Dhawal . How are you?
I'm fine.
Yeah, Dhawal?
So just two questions. First is, if you can just help me with the ramp-up plan of the Punjab plant. And secondly, how are the spreads behaving given the recent fall in the crude prices? How are the overall spreads behaving as far as we're concerned? Thank you.
Yes. As far as the plant is concerned, as I mentioned, we are going to commission towards the end of the first quarter. So towards the end of June, we start. We will start with a capacity of about 350 tons a day. And by the end of the next quarter, that is the September quarter, we will have ramped up fully to the 685-700 tons per day. That's the first one.
So second half of this financial year is we see pool utilization, right?
That's right. That's true.
Okay.
As far as the drop in crude prices, yes, they have impacted us positively in the way that because of the sheer volatility and the steep drop and climb, we have been able to retain and increase our margins. I see that going forward, the crude being remaining in this area, this deltas will only move up northwards.
Great. So just in terms of the commissioning cost for the new plant, what would be the upfront commissioning cost that we may have to face, which may not be recurring in nature?
No. See, commissioning cost as such is just that. When we start up, we are starting at a lower capacity of 350 tons. Our peak cost utilization will come when we come to that 750 tons per day. But that's not going to be a major impact on the cost.
Great. And so lastly, when you said the spreads are improving, any number that you would want to put in over here, probably in terms of EBITDA per kg or whatever ways you would want to?
So as you've seen in our numbers from the third quarter to the fourth quarter, we are gone up by about 110 basis points on the EBITDA. And I think going forward, the quarter, we also would be up by about a similar number. And going forward with the Punjab facility commissioning and the inherent advantages that I explained earlier. To another question, with that, yes, that's why I said we aim that this quarter, considering the cost of startup, what you mentioned, everything, we aim to do between 10% and 11% for the year FY 2026.
Thank you so much, sir, and all the best.
Thank you.
Thank you, sir.
We'll take our next question from the line of Marshall and individual investor. Please go ahead.
Yeah. Since you mentioned that in the Q1, we will be commissioning the plant, and by the Q2, it will be about 350 tons. And by Q3, it will be full. So it means if you take it like, for example, weighted average, so almost you can say when this capacity is 250,000, so almost 200,000 will be utilized or 180,000 will be utilized. So it means can we say safely that our turnover should at least grow by 80% this year as compared to FY 2025?
No. We will get an output we are estimating. We will get about 65% of the total capacity that we will get. Next year, we will get the full capacity, which will give us an additional revenue of around INR 3,000 crore. This year, we will add about between INR 1,500, INR 1,600 crore to INR 1,800 crore. So we aim to close FY 2026 at a revenue top line of INR 4,600, INR 4,700, INR 4,800 , and we aim to do an EBITDA of 10%-11% on that.
Okay. And you mentioned that this PTA plant will be commissioned by IOC and will be second Reliance or somebody else? And when is the expected date of commissioning for each of these plants? Sorry?
GAIL India is the second plant, but GAIL India is the plant first to be into production by the end of the calendar year 2026.
So, when is GAIL coming in which quarter, sir?
In the first quarter of calendar year 2026.
Oh, so means like within June?
Yeah. In January of 2026.
January 2026. Okay, fine . You mean calendar year? Okay. So still about six months ahead. Okay. That's fine. Okay. And then you also mentioned about this. Sorry. Please continue.
No.
Hello?
IOCL plant is expected to commission somewhere middle of 2026.
Middle of 2026. Okay. Fine, that's enough, sir. And then you also mentioned about GST subsidy or GST benefit in Punjab plant. So it was not much audible. Can you please repeat it?
No. The agreement between us and the government says that they will give us a refund on the net state GST payable up to two times the capital investment over a period of 17 years.
Okay. So that will be huge. So almost about INR 6,000 crore something you will get?
But this will be applicable only on the net state GST payable.
Limited up to the state GST?
Yes.
Yeah. Okay. And my last question is that, I mean, how do you see this demand scenario with respect to the Punjab plant? Whether the offtake will be immediately marketed or will it form sort of some surplus supply there? What the demand ends up execution for the PFY there?
As I mentioned earlier, almost a million tons is consumed there between the five principal markets in the north. And as we stand today, what we are setting up in the first phase is about 60%-25% of that capacity. So our material being the local supplier and the just-in-time supplier and with the freight advantages, we are placed from day one. So we don't see a challenge in placing the material there. The 75% of the balance will still be coming from the west. So we don't see a challenge in placement of.
Okay. Okay, and my last question with that, since it is a mega plant, considering the size of our company, so what kind of risk do you foresee and how do you plan to mitigate those risks?
No. Because see, in this sort of a plant, I'll just give you this answer in a different manner that when my team decided to make a business plan for this growth, they decided for Silvassa. We only shot it down for this reason that though it was easier and less effective for us because we didn't want to produce and then go out to sell. So here, at least we are the material is placed from day one. We are not in a position to go out and sell. So we can utilize our assets fully. So I don't see any challenges there. The plant is coming up well there, and we are well on time as promised that we will commission in the first quarter.
Yeah. In terms of technology absorption, everything will be fine, right?
Yes. Because the technology we have got the latest technology available in the world, I mean, from the best suppliers of the respective equipment. We've got the spinning lines from Barmag, Germany. We've got our CKCEC, Chinese supplier who are the leading suppliers of polymerization. We got our DTY machines from Germany as well as India. We've got our automation from Salmoiraghi, Italy. We have got our post-production automation from Craftsman. So we have the best available technology in the world with us, which will give us efficiency as well as the cost OpEx.
Great. Means you have fantastically elaborated all the questions. My humble submission is that since it's a mega plant in a new geography, so I would request you and the board and the audit committee to have the strongest possible because you can say internal control, financial control, and the corporate governance so that there is no leakage of any revenue or any cost inflation, nothing is there.
Yeah. I appreciate your suggestion, and it's well noted, and we are already taking cognizance of that, and we are following in that direction, but having said that, yes, it's a good suggestion. Thank you for that.
Thank you, sir. Thank you.
Thank you. We'll take our next question from the line of Varun Gajaria from Omkara Capital. Please go ahead.
Hi, Thank you so much.
Varun, we cannot hear you clearly. Can you use your handset mode, please?
Yeah. A little bit now. A little better?
Yes. Please go ahead.
Yeah. So thank you for the opportunity and congratulations on a good set. So just wanted to get some clarity that from a lot of textile players that we've been hearing that recovery of demand probably looks a little. I mean, demand looks a little tentative for now, probably in the first half of this year. So what is, sorry?
No. There is some echo coming from behind. I'm not able to hear you clearly. There is some other sound coming in. Please can you repeat that and just ensure that the sound is not there so that I can hear you?
Yeah. Is there any Bluetooth?
Yeah. Is it better now?
Yeah. Just remove the Bluetooth and speak from your handset.
Now it's better.
Yeah. Yeah. I'm on the handset mode right now. Is it better?
Yeah.
Okay. I just wanted to get some clarity that lately we've been speaking to a lot of textile players and the commentary we've been getting is that the first half will be slightly tentative given the tariff-related uncertainties. What is your take on the same? Do you think that after the first phase of our capacity comes in, we'll be able to soak in all the demand? Will the demand be able to soak in all the supply that we'll be throwing out?
Yeah. I would put this a little differently. The second half, you will see the impact of the tariff, FTAs, whatever, a lot more than you will see in the first half, yes. But I mean, without this tariff business, also the downstream people were able to send their apparels and garments, and that is only increasing day by day. Today, if I have my information correctly, the downstream apparel people's order books are relatively strong today.
Okay. So we are confident that whenever our capacity comes in, do we have a tariff as such in terms of order book, or will it be based on the capacity that comes out?
No. In our business, the order book is such that suppose somebody gives us an order for a month's supply or two months' supply, yes, the supply is noted, but the pricing is changed every 15 days. So yes, the order books are relatively normally for 15- 20 days only.
Okay. And what kind of arbitrage is there between export guys of India, of polyester yarn from India, and that from China? What kind of difference is there?
See, there are two parts to this. Their pricing also is very dynamic in the sense that when they got hit by the tariffs, yes, they did lower the prices. Otherwise, once the settlement has been done between them and USA, they have increased the prices accordingly. But the prices are one part. The other part is also the FTA agreements, the freight costs to different countries from India and China also makes a net impact on the pricing. So it's a very dynamic situation there. I cannot really pin down to one particular aspect and tell you.
Right. Right. Okay. Okay. Thank you so much. And all the best for the coming quarters. Thank you.
Thanks.
Thank you.
Thank you.
We'll take our next question from the line of Ashutosh Nemani from JM Financial. Please go ahead.
Yeah. Thanks for the opportunity. Yeah. Am I audible now? Yeah. So my question is on the ROCE, considering they are doubling the capacity on the polyester side, wanted to understand what kind of yarns would be the more value-added offering. So do we anticipate our return on capital employed increase? And if you could provide ROCE based on segment like polyester, cotton, and technical textiles?
See, as far as the value-added is concerned, that is a journey. That is a constant journey which we go on. It's not a one-day thing that we planned today and we started. Yes, having said that, when we start the plant, we don't add so much of value-added material, and then over a period of time, we go ahead and do that. So that's your answer for the value-added material. And your second part of the question was what? I missed you over there.
If you can provide what kind of return on capital employed we generate on polyester yarn manufacturing, cotton yarn manufacturing, and technical, all the three segments? Do we have?
No. We don't look at it that way. We look at it as a company on the whole. And that's the advantage of having three verticals because we have seen over years that one vertical, if it provides a little better, I mean, lower EBITDA, the other one takes care of that. So we look at it big view rather than an individual business. And that's why we keep growing all the three segments over years to maintain this balance what we have.
Thanks a lot. My second question is on the fact we also manufacture recycled yarn. Wanted to understand where do we source those or pitch it from and what percentage does it contribute?
No. It's a very small. We have just ventured on that journey of recycled yarns. We buy our flakes from abroad. We import it, and we sell it. But it's a very small journey. It's a very small component today. The idea to be there is that as and when in the next couple of years when it blows up this recycled business, we are there if we have established ourselves. That's the whole idea. Not a more revenue idea today, but it's a more idea of being there when we need it.
Idea behind importing it, considering like there are many domestic recyclers also that are in this business. So any particular advantage they get from importing it and not using the domestic players?
Yes. There are even locally and whereas imported also, there are recycled chips available from different players with different pricings. So whatever we have bought, we are happy with our supplier in terms because of the product that it gives us an edge over.
Okay. No pricing.
I'm not saying that anybody is less, but this is what we prefer. This is our philosophy of doing it.
Okay. Thanks a lot.
Thank you. We'll take our next question from the line of Pranav from Prudent Equity. Please go ahead.
Hello. Am I audible?
Yes. Please go ahead.
Yeah. Yeah, Pranav. Go ahead.
My question was, what kind of finance cost can we expect annually considering the data is ballooned up and you probably need some working capital financing?
Yeah. I will ask Sanjay to answer this for you.
Yeah. The expected finance cost going forward would be close to INR 80 crore-INR 85 crore on account of the term debts of the Polycot project in Punjab and minor costs on account of working capital limit utilization at Silvassa.
And how confident are we of the plant commissioning?
Come again. I missed you. How confident are we? Hello?
Hello. Am I audible? Hello, hello?
Please go ahead.
Yeah. I would ask you the question. Yeah. I'm just repeating the question. How confident are we in commissioning the plant this quarter?
Oh, we are very confident. We are almost there. We're just around the corner for commissioning by the end of the first quarter and it will take, as I mentioned earlier, it will take us one quarter to move from that 350 - 700.
Okay. All right. Thank you so much.
Thank you. We'll take our next question from the line of Rushil Selarka from PINC Wealth. Please go ahead.
Hello. Yeah. So can you just help us with an understanding that since our power cost at Silvassa plant is INR 6 per unit, so is there any way that we can reduce those power costs by procuring more of renewable source of energy? Just wanted to understand.
Yeah. See, on paper, yes. But effectively, because at INR 6 a unit and with the variable cost that the local DISCOMs and the local administration puts, it's not a very feasible thing at this moment in time. But we are still working on that. And as I mentioned earlier, regarding Punjab, we have that INR 5 for four years. There also, we are working that going forward post four years, how we are going to mitigate to bring it at INR 5 or cheaper than that.
Sir, our interest cost for the next year is INR 80 crore-INR 85 crore, right?
INR 85 crore.
Yeah. INR 85 crore across.
And depreciation will be somewhere around INR 45 crore-INR 46 crore. It will be the same 100, or there will be an increase in depreciation also?
Increase in depreciation also on account of the Punjab plant.
Okay. So, sir, can you just give us what can be a depreciation?
Yeah. So you can add another INR 70 crore.
INR 115 crore.
INR 70 crore for that also.
Sir, currently, this year, we have made an EBITDA margin of 9% for the full year. Are we going to expect for the next year to make it to double digit?
As I said, because of the inherent advantages that we have at Punjab on the operational as well as being the local supplier and the logistics advantages, yes, and the way we see the market going, yes, we are definitely going to be there in the double digit going forward.
Okay, sir. Thank you, sir.
Thank you. We'll take our next question from the line of Harsh Mittal from Emkay Global. Please go ahead.
Thank you. Good evening, sir, and to the team. Firstly, congratulations on the good set of numbers and achieving the guidance which was given earlier. My question is that what is the small question, and sorry if I missed it in the earlier opening remarks, what is the consolidated net debt as of the end of FY 2025?
The net debt is INR 1,050 crore as of March 31st, 2025.
Gross debt?
INR 1,084 crore.
Sure. Thank you, sir. Thank you.
Thank you. We'll take our next question from the line of Harshit Sachdeva from Columbus Capital. Please go ahead.
Hi. Am I audible?
Yes, you are heard.
Hi, sir. Sorry, new to the company. Just was going through your historical. So we're seeing FY 2022, we've never recovered from the peak sales and EBITDA margins and profits that we registered in that year. So any reasons why it's come down over the next three years?
Yeah. As I mentioned earlier, that FY 2022, 18% EBITDA, that's the post-COVID pent-up that we had across all industries. So because of that, I won't call it as a very normal EBITDA. And post that, we had the two wars that came up, which affected not only the direct exports of the country but also the indirect export, which also resulted in lower, I mean, more pressure locally. But having said that, in spite of that, the good thing was that the team was able to still run the plant fully. We stressed our effort even in those years, and we were able to place our materials even in those years.
Okay. Okay. Got it. Thank you, sir.
Thank you. We'll take our next question from the line of Ashutosh Nemani from JM Financial. Please go ahead.
Thank you. I have one question.
Thank you, Ashutosh.
Yeah. Is it better now?
Yes. Please go ahead.
Yeah. Actually, by when will our technical textile capacity double? In our initial comment, we told, right? Technical textile capacity will double from 9,000 - 18,000.
Yeah. So entire revenue of that will come in FY 2027.
Okay. Yeah. Thank you.
Thank you. Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to Mr. Paresh for closing comments. Over to you, sir.
Thank you. I thank the entire team at Sanathan Textiles for the untiring efforts and all our stakeholders for the continued support and faith in our company. This is all from our side, and I would again like to thank all very much for your time and attention in attending the call. Thank you very much.
Thank you. On behalf of Sanathan Textiles Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.